How Retirement Benefits Will Change in 2016

November 19, 2015

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Retirement savers will get the option to participate in a
new type of retirement account next year, the myRA. There will also be fewer
Social Security claiming options for married couples and a small Medicare
premium increase for some beneficiaries. Here are some of the important ways
retirement benefits will change in 2016.

Introducing the myRA. The
myRA is a new type of Roth retirement account launched in late 2015
that has no fees and is guaranteed by the government never to lose value. There
is only one investment option, a Treasury savings bond with a variable interest
rate that has averaged 3.19 percent over the past 10 years. The savings bond
interest is not taxed while in the account and won’t be taxed at all if you
leave it in the account until after age 59 1/2. Savers who earn less than
$131,000 for individuals and $193,000 for couples are eligible to contribute up
to $5,500 per year, or $6,500 if they are age 50 or older. However, once the
account balance grows to $15,000, or the account turns 30 years old, the money
will be transferred to a private sector Roth IRA.

No more claiming
Social Security twice. Some married individuals who are 66 or older
have been claiming Social Security benefits twice. They first collect spousal
payments and then later switch to payments based on their own work, which will
then be higher because they claimed it at an older age. However, workers who
turn 62 in 2016 or later will not be able to claim both types of payments, but
must select one or the other.

Stricter Social
Security suspended payment rules. Social Security beneficiaries who
don’t need the money are allowed to suspend their payments and then resume
higher payments at a later date due to the accumulation of delayed
retirement credits. In the past, spouses and dependent children could claim
payments based on your work record while your payments were suspended and
continued to grow. However, beginning in May 2016, suspending your payments
also suspends payments for anyone else receiving payments based on your work.

Higher Medicare Part
B premiums for some people. Most Social Security recipients will
continue to pay the same $104.90 Medicare Part B premium in 2016. This is
the case because Part B premiums are prevented by law from climbing faster
than Social Security payments for most existing beneficiaries and there will be
no Social Security cost-of-living adjustment in 2016. However, people who newly
enroll in Medicare Part B in 2016 will pay a slightly higher Medicare Part B
premium of $121.80 per month. This increase was a last-minute fix in the 2016
budget bill that prevented a much larger premium increase to $159.30 for new
beneficiaries. As in previous years, high income beneficiaries will
pay higher Medicare Part B premiums. The Medicare Part B deductible will
increase from $147 in 2015 to $166 in 2016.

Bigger saver’s credit
threshold. It will be slightly easier to qualify for the saver’s
credit in 2016. The adjusted gross income limit to claim the credit will
climb by $250 to $30,750 for individuals and by $500 to $61,500 for married
couples. “The Saver’s Credit is a tax credit above and beyond the advantage of
tax-deferred savings when contributing to a 401(k), 403(b) or IRA,” says
Catherine Collinson, president of the Transamerica Center for Retirement
Studies. This valuable tax credit for low- and moderate-income retirement
savers is worth between 10 and 50 percent of the amount contributed to a
retirement account up to $2,000 for individuals and $4,000 for couples.